As another school year gets underway, the Department of Education recently announced a series of actions to better protect taxpayers and students alike from one of the nation’s largest for-profit colleges: ITT Technical Educational Services, Inc. The Department’s actions come on the heels of the Accrediting Council for Independent Colleges and Schools finding that ITT Tech “is not in compliance, and is unlikely to become in compliance” with accreditation standards.

“We don’t take these actions lightly,” said Education Secretary John King, “and we know students will have a lot of questions about how our enforcement affects them.”

“[Looking at all of the risk factors, it’s clear that we need increased financial protection and that it simply would not be responsible or in the best interest of students to allow ITT to continue enrolling new students who rely on federal and student aid funds,” continued Secretary King.

The Aug. 25 announcement by the Education Department could be a death knell for the school whose latest report to the Education Department revealed that 68 percent of its students use federal grants and loans. In actual dollars, $580 million of ITT Tech’s total $850 million in reported 2015 revenues came from federal aid funds.

The following day, California’s Bureau for Private Postsecondary Education issued an emergency decision directing ITT Tech and its subsidiaries to cease enrollment of any new students at 15 locations across the state. That decision took effect on September 1. The for-profit school is also under investigation by other state and federal offices.

Last year, approximately 45,000 students were enrolled either through its nationwide online programs or at one of its more than 130 campuses located in 38 states.

Further, within 30 days of the Department’s announcement, ITT Tech must increase its existing surety to 40 percent of all Title IV aid the school received in 2015, an amount that is more than $247 million. Surety funds are held by the Department in a Federal Holding Account and are used in the event of campus closings to reimburse Education for liabilities related to investigations such as student refunds, student loan cancellations and other expenses.

Additionally, ITT Tech must advise current students of its loss of accreditation. It is also banned from any unusual expenditures without federal approval, and is forbidden from allocating paying raises, bonuses or severance packages to its executives. Any “significant financial or oversight events including violations of existing loan agreements” must be reported to Education within 10 days of such occurrences.

New ITT students will be unable to access federal financial aid for their educational costs. Returning students who have already incurred federal student loan debt, are advised by the Department to consider three options:

Transfer credits to a new school to complete your education, so long as a new college or university will accept ITT’s credits; or

Suspend educational studies until the institution’s issues are resolved in the coming months.

As broad as the Department of Education’s actions are, it has no bearing on another key source of student aid: The U.S. Department of Veterans Affairs. According to Ted Mitchell, Education Undersecretary, the (VA) will notify affected GI Bill students. Further, these students are advised to carefully consider the potential impact that the Department’s actions may have on their educational goals.

If ITT’s dilemma sound familiar, it’s only because it is. Nearly a year ago, $531,224,267 of financial justice was ordered for students who attended the now-defunct Corinthian Colleges. The Department is currently finalizing its “borrower defense” rules, which would allow student borrowers to discharge their loans after proving fraudulent activity on the part of their institution.

Also last year, the Center for Responsible Lending (CRL) released research that found how high-cost, for-profit colleges make millions each year by targeting students of color. Although for-profit colleges actually enroll only 13 percent of all college students, they account for nearly half of all student loan defaults.

“For profit colleges have positioned themselves as a means for traditionally underserved students of color to achieve educational success and thus to increase their ability to earn higher incomes, and build wealth,” states the report. “If these schools do not engender better outcomes for their students and instead merely saddle students with debt, then the access these schools provide could prove to widen existing income and wealth gaps, rather than to narrow them.”

“This is a spigot problem,” noted Whitney Barkley, a CRL policy expert who specializes in student loans. “In this case, the Department has decided to turn off the spigot of funding. Now, they should take an additional step – making sure that the tens of thousands of current and former ITT Tech borrowers everywhere understand all of their options. No one should become a victim of education fraud.”

And once again, our quest for financial justice continues …

Charlene Crowell is the communications deputy director for the Center for Responsible Lending. She can be reached at Charlene.crowell@responsiblelending.org.

Charlene Crowell is the Communications Deputy Director for the Center for Responsible Lending (CRL). Prior to joining CRL, Charlene was a registered public lobbyist in Arizona and in Michigan, advocating affordable housing and Smart Growth initiatives, and additionally served as press secretary to both a state attorney general and mayor. Early in her career she was a broadcaster in both television and radio, holding a variety of assignments.

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